News Hits

Duggan and chief executives announce creation of new regional water authority

With what Oakland County’s L. Brooks Patterson described as the “sword of Damocles” hanging over their heads, Detroit Mayor Mike Duggan and the chief executives of Oakland, Wayne and Macomb counties announced creation of a new regional water authority at Detroit’s federal courthouse on Tuesday morning.

The sword Patterson referred to is being wielded by U.S. Bankruptcy Court Steven Rhodes. One way or another, the issue of the Detroit’s Department of Water and Sewerage [DWSD] needed to be addressed for the largest municipal bankruptcy in U.S. history to be settled. If the regional leaders weren’t able to come together in agreement on a plan they had a hand in forming – in closed-door mediation sessions overseen by U.S. Judge Sean Cox – then they would have had to swallow whatever plan might emerge from the bankruptcy court.

In other words, cooperation between Detroit and suburban interests was preferable to a court-ordered decision.

“We didn’t have any other options,” said Patterson. “He [Rhodes] could cram down our throats his version of a settlement.”

As part of the proposal to create what would become the Great Lakes Water Authority:

Detroit would retain ownership of the current system. Regional aspects of the DWSD would be leased to the authority for $50 million a year for the next 40 years. Included in that are roughly 400 miles of regional water mains, 360 of sewer pipes, five water treatment plants and the massive sewage treatment plant on Jefferson Avenue.

That $50 million a year lease payment must go pay for water and sewer system infrastructure maintenance and improvement within the city; the money can’t go into the city’s general fund. The money is sorely needed. Duggan said that the city currently experiences about 2,000 water main breaks a year. Duggan said the plan is to issue bonds totaling $500 million to $800 million (to be repaid with the $50 million a year) in order to quickly began the massive job of repairing and replacing Detroit’s decrepit water system infrastructure.

The board governing the proposed authority would consist by one appointee from each of the three counties, one gubernatorial appointee, and two from the city of Detroit.

Major decisions such as rate increases must receive at least five votes, in effect giving Detroit veto power over such decisions. One such decision could be whether to privatize operation of the water and sewage treatment plants.

The wholesale rate of water sold by the authority is capped at 4 percent a year for the next 10 years. Individual cities can tack on additional increases.

Detroit is solely responsible for billing customers within the city.

A fund, based on .5 percent of the authority’s operating revenues, will be created to help poor people throughout the tri-county area pay their bills. Funding for the first year is expected to be $4.5 million.

Asked why they agreed to create that kind of fund rather than a true affordability plan that ties rates to income and the ability to pay, Duggan said that the plan is based on “national standards.” When it was pointed out that a number of major cities around the country do have plans based on the ability of customers to pay, Duggan responded with a terse, “I already answered your question,” and moved on.

Duggan, responding to media questions after the formal news conference had ended, was also asked whether he thought that, given his acknowledgement that the current system designed to help poor people pay their bills doesn’t meet national standards and is underfunded, if he would support instituting a moratorium on shut-offs until the proposed regional system is up and running.

His answer, in short, was a definite “No.” The mayor said that his recently implemented 10-point plan, which is primarily designed to help spread out past-due payments and requires better notification of customers in danger of having their service cut, is working. “We have a very fair program right now,” he said.

For the proposed authority to actually be created, it needs the approval of either the Detroit City Council or, presumably, Emergency Manager Kevyn Orr. The board of commissioners of at least one of the counties must also sign off on the deal. If any of the counties don’t agree to the deal, their representative to the GLWA board would be appointed by the governor.
Asked about a provision in the Detroit City Charter that prohibits a deal like this involving the DWSD without first being approved by the city’s voters, Duggan said that sort of public decision-making has been negated by the bankruptcy process.